Trump may eliminate EV tax credit funding in 2025, warns lawyer.

• To be eligible for a federal tax credit, consumers should purchase or lease an all-electric or plug-in hybrid vehicle by the end of 2024, according to the advice of auto and legal experts.
• The president-elect pledged to eliminate the EV tax credit, which can be worth up to $7,500, and Tesla CEO Elon Musk, who is a Trump supporter, shares this view.
• The elimination of credit is likely to be a Republican goal in order to raise funds for a package of tax cuts estimated to cost several trillion dollars.

To obtain a Biden-era EV tax credit worth up to $7,500, prospective car buyers considering an electric vehicle must act quickly, as President-elect Donald Trump and Republicans on Capitol Hill may eliminate those savings in tax negotiations next year, according to auto and legal experts.

The removal of the EV credit in 2025 poses a real risk, according to Jamie Wickett, a partner at Hogan Lovells who specializes in federal tax policy, energy, and the environment.

Wickett advised consumers in the market for an EV to consider purchasing or leasing in 2024 to minimize the risk of credit disappearing.

The Inflation Reduction Act provided federal tax breaks for EV buyers and lessees until 2032, including all-electric and hybrid vehicles.

Up to $7,500 in credit is available for new cars, while used cars offer up to $4,000 in credit.

President Joe Biden signed the IRA in 2022, making it easier for consumers to access savings by allowing dealers to pay the funds upfront at purchase instead of waiting until tax season.

Trump pledged to 'cancel the electric vehicle mandate'

The Trump transition team plans to eliminate EV credits in order to fund a comprehensive tax cut package that Republicans are predicted to propose next year.

Trump's campaign agenda vowed to "cancel the electric vehicle mandate."

Elon Musk, CEO of Tesla and a Trump supporter, has advocated for ending tax credits and stated that ending subsidies would harm U.S. EV competitors.

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A spokeswoman for the Trump-Vance transition, Karoline Leavitt, stated that the president-elect intends to fulfill his promise.

"President Trump was re-elected by the American people with a significant margin, allowing him to fulfill the campaign promises he made, according to Leavitt in an email."

The future Republican tax package and the EV credit's fate are uncertain, according to experts.

The Tax Foundation estimates that extending a range of expiring income tax cuts and fulfilling various Trump campaign promises, such as reducing taxes on tips, Social Security benefits, and overtime pay, could result in a cost of approximately $7.8 trillion over the course of 10 years.

Eliminating all green energy tax credits, including the EV credit, would save approximately $921 billion, according to the report.

Waiting is 'too big of a gamble'

For several years, Laura, a 44-year-old resident of Charlotte, North Carolina, has been considering purchasing a plug-in hybrid due to its environmental advantages and cost savings on gasoline.

She was planning to purchase one vehicle due to the $7,500 EV credit, which made the cars more affordable, she stated.

Laura, who requested anonymity, is hurriedly purchasing a 2025 Chrysler Pacifica Hybrid before the year ends due to the possibility of the credit being revoked. Trump's hostility towards EV incentives makes waiting until 2025 a "risky move," she stated.

Laura qualifies for the full $7,500 credit, but there are restrictions based on car model and buyers' income.

She stated that dealers in her area have limited vehicles available due to consumers' rush to purchase EVs before the tax break expires.

She stated that dealers are optimistic about having more stock in the upcoming weeks.

Laura said she wouldn't buy the car without the tax credit.

"If it's not completed by December 2024, that changes everything for me," she stated.

There is a possibility that Trump and Republicans on Capitol Hill may attempt to revoke the $7,500 tax credit for consumers who purchase an electric vehicle (EV) after 2025.

Their "complete disdain for the tax credit" motivated her to quickly acquire an EV, she stated.

Take advantage of a 'known entity'

Ingrid Malmgren, senior policy director at Plug In America, advised consumers to utilize the tax credit as it is well-known.

Consumers typically receive the credit as a discount at the time of purchase, as stated by the U.S. Treasury Department. The car dealership essentially provides an advance tax credit to consumers, which is then refunded by the Treasury.

By signing a lease agreement before the end of the year, consumers can secure their savings contractually for a multiyear term, despite the overlap with Trump's presidency, according to Malmgren.

If a dealer includes a clause in the lease contract stating that if the tax credit is denied, the consumer's monthly lease payments will increase, Wickett said.

Wickett stated that in the most probable outcome, the federal EV credit would likely be phased out in 2026 or 2027, rather than retroactively ending it for all 2025 purchases, as he anticipates Republicans to pass a tax package by the end of 2025.

"He stated that although it's uncertain, it seems likely that the Republicans will succeed in passing a significant tax legislation."